Axalta Coating Systems LTD shares have risen by 5% early on Tuesday morning once the company announced that Warren Buffett, billionaire investor, has taken a stake in the business.
On Tuesday, the company tells us that a Berkshire Hathaway affiliate has agreed to purchase 20 million shares of the company at $28 per share, which amounts to $560 million.
That amount is below the Monday closing price of $28.33 a share. Regardless, the Berkshire Hathaway purchase caused the share price to rise 4.8% early in trading on Tuesday to reach $29.70 per share.
This purchase gives Berkshire Hathaway an 8.7% stake in the company, which makes powder and liquid coatings for the transportation and auto industry. The company Axalta itself will not receive any proceeds from the sale.
As part of the agreement, Berkshire Hathaway said that they will hold the shares for at least 90 days following the closing of the sale. Axalta, on the other hand, agreed to provide Buffett and Berkshire Hathaway with particular “registration” rights after the 90 day expiration.
Due to the terms of the deal, the stock was bought as a private placement transaction, and it was not registered according to the laws of the US securities exchange. This ultimately means that the stock cannot be sold or offered in the United States until they have registered or provided exemption from registration requirements.
“We are pleased to have Berkshire Hathaway Inc. take this share ownership position in Axalta,” said CEO and chairman Charlie Shaver. “Berkshire is the type of quality investor that Axalta has been fortunate to attract since our IPO last year. We believe this investment shows Berkshire support of our strategy to reshape ourselves into a growth and customer oriented, world class coatings company.”
Berkshire Hathaway and Warren Buffett are having a tough year with their publicly traded stock portfolio. Out of the top 20 stock holdings that Berkshire Hathaway has, five of them are some of the worst-performing stocks on the Dow Jones industrial average this year including Coca-Cola, which is down 2.5% so far this year.
Berkshire Hathaway’s fourth-largest holding, American Express, is currently down 14.4% this year. Procter & Gamble, another large holding, is down 8.8% and the fifth-largest holding, Walmart, is down 5.7%.
IBM, one of the top 20 stocks in the Berkshire Hathaway portfolio, is currently one of the top performers on the DJIA this year and it is up 1%.